–Congress and Subprime:Stuart A Gabriel, Matthew E. Kahn and Ryan K Vaughn look at congressional influence as a determinant of subprime lending. “A relatively unforeseen implosion in housing markets figured prominently in the 2007 meltdown in capital markets and the subsequent downturn in the global economy. This column presents new research on the political geography of subprime lending. Congressional leaders – as well as other recipients of campaign contributions – may have benefited from gains to trade in the direction, pricing, and sizing of subprime mortgage loans.”

–Liquidity Hoarding:Tanju Yorulmazer examines disruptions in the interbank market. “One of the most interesting phenomena marking the recent financial crisis was the disruptions in the interbank market, where banks borrow and lend reserves to each other. This post draws upon my paper with Douglas Gale, “Liquidity Hoarding,” to discuss this practice by banks during times of increased uncertainty about future liquidity needs and its consequences for the efficient transfer of liquidity in the interbank market.”

–Historical Austerity:Andrew Edwards says austerity pushed the American colonists to revolt. “In the early 18th century, North America held a role in the British Empire that was similar to the one occupied by Cyprus or Slovenia in the euro area today. Americans were slavers, smugglers, rumrunners and fanatics — as “opulent, commercial, thriving” as they were irresponsible and fiscally profligate. But as the empire struggled to stay solvent after the Seven Years War, the government of Prime Minister George Grenville attempted to bring the colonists to heel in the name of fiscal austerity. “The Circumstances of the Times, the Necessities of the Country, and the Abilities of the Colonies, concur in requiring an American Revenue,” wrote Thomas Whately, a Grenville ally, in 1765. To be sure, the 18th century British Empire and the euro area are very different. But the similarities are still worth noting: A central unelected body (at least not by North Americans), attempted to solve a fiscal problem by inflicting misguided pain on the periphery.”

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